Reading John Bogle's The Little Book of Common Sense Investing.
This book totally convinced me that buying an index fund is the best way to go:
(1) Index fund has low cost. The expense ratio of Vanguard 500 index fund is only 0.18%, while the average ER of actively managed funds is 1.5%!
(2) Index fund is tax efficient. "Taxes are a crucially important financial consideration because the earlier realization of capital gains will substantially reduce net returns. Index funds do not trade from security to security and, thus, they tend to avoid capital gains taxes." (page 67)
Holding a low-cost index fund is holding the beauty of simplicity, while it is the most efficient and least risky choice of equity investment.
Posted by Bozeman at June 17, 2007 03:39 PM